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How significant of a priority is anti-bribery and corruption enforcement for Australia?

Over the past two years we have heard a great deal about Australia’s commitment to combating corruption domestically and overseas. Two new initiatives, the National Anti-Corruption Plan and a review of our anti-bribery legislation, were launched by the Attorney General’s Department in late 2011. The OECD Working Group on Bribery also visited Australia in May of 2012 to review our government’s enforcement of anti-bribery legislation. Their visit resulted in an unflattering report that raised questions about our government’s commitment to preventing the bribery of foreign public officials. The Australian Government is currently working to analyse the OECD report’s recommendations and to understand the impact any potential changes to our legislation would have on the public and private sectors. The course of action taken during the next 12-24 months will indicate if the Australian Government is serious about investigating allegations of foreign bribery and undertaking initiatives to reduce corruption both domestically and abroad. As a nation, our reputation for low corruption is outstanding, but the lack of investigations and enforcement action raises some questions in the international community about whether our reputation is deserved.
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Background

In July 2011, Australia’s first foreign bribery charges were laid against two companies partially owned by the Reserve Bank of Australia (RBA), Securency and Note Printing Australia (NPA). The ‘Securency scandal’, as it is widely known, sent shockwaves throughout the international community given that Australia is ranked as the 8th most corruption-free nation by Transparency International. Not only was it surprising that violations occurred, but also that the alleged bribery was committed by RBA owned firms. Apparently, insufficient due diligence was conducted on third-party agents as it has been reported that the foreign agents committing the alleged acts of bribery were introduced to Securency and NPA by Australian diplomats and AUStrade officials overseas. The Securency scandal highlighted the need to increase awareness training for Australian Government employees and law enforcement agencies. The scandal has left some wondering if Australia’s admirable low corruption record is a result not of strong laws and a culture of low tolerance for corruption, but instead for lack of investigation into allegations of bribery and corruption.

Key changes under consideration
The Australian Government is considering making changes to our anti-bribery legislation. A public consultation paper, addressing the need to consider changes to our laws, was published in November 2011. The paper asked for written submission to help the government understand stakeholder views on how possible changes to Australia’s anti-bribery laws would affect stakeholders. Despite the fact that the consultation period ran through the holiday season (November to February), several submissions were received from industry associations, academics and the corporate sector.

One of the changes to the legislation currently being considered by the Attorney General’s Department is a change to the legality of facilitation payments paid by Australian companies to foreign government officials. Currently, it is not illegal for an Australian company to pay a facilitation payment to a foreign public official, but these payments must meet certain conditions under section 70.4 of the Criminal Code Act 1995, including that a record must be made of the nature, value, date and amount of the payment. The U.S. also allows for companies to pay facilitation payments, while the UK’s Bribery Act prohibits such payments.

One month after the consultation period on the facilitation payments defence had begun, the Australian government announced they would begin development of a National Anti-Corruption Plan. The Attorney General’s Department outlined the need for the plan and subsequently held two forums for key stakeholders, inviting members of the public, academic, not for profit, and private sectors to participate. At the July forum held in Canberra, much of the discussion centred around domestic bribery and corruption and most attendees were from the public sector. International Trade Advisors attended and addressed the need for SMEs to receive awareness training and additional guidance about how to implement effective anti-bribery and corruption compliance programs. About fifteen written submissions were also received, some of which contained recommendations including the drafting of a whole of government policy, the pros and cons of centralising investigations, and whistleblower protection considerations. Information obtained from these submissions is still being analysed and compiled and the government has not yet given an indication of when the final plan will be released.

What the OECD thinks of Australia
Our anti-bribery and corruption laws were amended and strengthened in 1999, subsequent to Australia becoming a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Since signing of the Convention, Australia has been subject to peer reviews of the effectiveness of our anti-bribery and corruption legislation. In May of 2012, the OECD Working Group on Bribery visited Australia and conducted a series of panels with key stakeholders to understand and evaluate Australia’s implementation and enforcement of anti-bribery legislation. International Trade Advisors participated in a panel before the Working Group, addressing how SMEs may be affected by a change to our legislation. The 2012 visit by the OECD Working Group was the third of their three-phase evaluation.

Not surprisingly, the OECD’s Phase 3 report, published in October 2012, expressed ‘serious concerns’ that enforcement of anti-bribery and corruption legislation in Australia is ‘extremely low’. Their concerns stemmed from the fact that only one case of foreign official bribery (Securency) had been prosecuted since introduction of strengthened legislation in 1999, and that of the 28 cases reported to the Australian Federal Police (AFP), 21 were concluded without charges having been laid. The report’s many recommendations included that the AFP be better resourced and be more pro-active in its investigations, that enforcement efforts in Australia be strengthened through coordinating efforts between the AFP, federal government and state agencies, and that ASIC should assist the AFP to prevent, detect and investigate foreign bribery. The report also recommended that whistleblower protection be strengthened and altered to afford protection for public and private sector employees who report suspected foreign bribery to the AFP.

Where we stand now
Earlier this month, the Sydney Morning Herald reported that the AFP may be set to reopen two corruption inquiries stemming from allegations made against Australian companies OZ Minerals and Cochlear. It would not be surprising if 2013 saw a renewed interest in previously concluded investigations related to allegations of foreign bribery. Regardless of what course of action the Australian government intends to take to better enforce anti-bribery and corruption legislation, Australian companies with operations overseas are taking note of the impact U.S. and UK legislation can have on their operations. Both the U.S.’ FCPA and the UK’s Anti-Bribery Act have extraterritorial reach and exert influence on corporate policy globally. Indeed it is the U.S. and UK’s laws that create the impetus for Australian companies to create staff training and compliance programs to prevent inadvertent violations of anti-bribery and corruption legislation.

In addition, the U.S.’ 2010 Dodd-Frank Act, has caught the attention of corporations and individuals globally and has created significant controversy. The provisions of the act not only protect whistleblowers but also entitle them to between 10 and 30% of the total fines imposed on companies. The monetary compensation serves as a reward for providing information to assist the SEC with their investigations and is in recognition that whistleblowers may struggle to find employment following the prosecution of their employers. The first such award was issued by the SEC in August 2012 and the SEC now receives 8 tips a day from would-be whistleblowers seeking to ‘cash-in’ on their employers’ misconduct. Though a bounty for whistleblowing may never be something we see in Australia, the prospect should give any employer something to think about.

Conclusion
Regardless of our Australian laws, Australian companies should have policies and procedures in place to educate staff, foreign agents and representatives about what constitutes bribery, where the grey areas are, the company’s stance on bribery, and the consequences of engaging in bribery and corruption both to the individual and the corporation. Multinationals have been proactive in creating compliance programs and training staff to safeguard their reputations and reduce risk of violations. However, not all Australian companies with overseas operations can afford to spend money on creating such programs and the lack of enforcement action in Australia to date leaves little impetus for some to put forth the effort. The Australian government not only needs to provide more resources to companies to understand their obligations under the law, but also needs to work with industry to improve the culture of compliance here in Australia if we are to maintain our ranking as the 8th least corrupt country in the world. If Australia is serious about both maintaining its impressive Transparency International ranking and enforcing anti-bribery and corruption legislation, the government needs to be more transparent in its expectations of companies, stronger in its enforcement actions, and more proactive in providing guidance and resources to companies.

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